Deleveraging? What deleveraging? Since the start of the credit crunch, corporate leverage has risen at a faster rate than it did at the peak of the boom, even as firms work hard to reduce borrowings. Companies that once embraced leverage in the name of shareholder value now find their debt piles balanced precariously on shrinking earnings. Absent a swift recovery, leverage is likely to rise even higher...

The picture is more worrying for companies where deleveraging should be the top priority: those bought by private-equity firms. For example, look at chip maker Freescale Semiconductor. When taken private in December 2006, it had leverage of just over 5 times, but relentless earnings pressure has pushed that figure ever higher. Analysts now forecast leverage will peak at more than 10 times earnings before interest, tax, depreciation and amortization, despite an exchange offer that cut debt by $1.9 billion.

Meanwhile, among the most aggressive European LBOs, leverage is standing still or rising, according to Fitch Ratings...

None of this bodes well for credit ratings. Even if total debt outstanding is stabilizing or falling in some cases, the ratings agencies focus on metrics such as asset-backing and interest cover. In the first quarter, Standard & Poor's downgraded 523 companies and upgraded just 38, giving a record downgrade ratio of 93%. That will make it harder for companies to refinance at attractive rates, leaving many running hard just to stand still.

Way to go Geithner, Bernanke and Summers. Instead of insisting that a couple of levels be taken off the top of the house of cards, you've encouraged the gamblers to add new, ever-flimsier layers.

Scientists studying the virus are coming to the consensus that this hybrid strain of influenza -- at least in its current form -- isn't shaping up to be as fatal as the strains that caused some previous pandemics.

In fact, the current outbreak of the H1N1 virus, which emerged in San Diego and southern Mexico late last month, may not even do as much damage as the run-of-the-mill flu outbreaks that occur each winter without much fanfare.

The LA Times goes on to provide useful detail:

Mounting preliminary evidence from genetics labs, epidemiology models and simple mathematics suggests that the worst-case scenarios are likely to be avoided in the current outbreak.

"This virus doesn't have anywhere near the capacity to kill like the 1918 virus," which claimed an estimated 50 million victims worldwide, said Richard Webby, a leading influenza virologist at St. Jude Children's Research Hospital in Memphis, Tenn...

"There are certain characteristics, molecular signatures, which this virus lacks," said Peter Palese, a microbiologist and influenza expert at Mt. Sinai Medical Center in New York. In particular, the swine flu lacks an amino acid that appears to increase the number of virus particles in the lungs and make the disease more deadly...

We expect to see more cases, more hospitalizations, and, unfortunately, we are likely to see more deaths from the outbreak," Health and Human Services Secretary Kathleen Sebelius told reporters Wednesday on her first day at work.

But certainly nothing that would dwarf a typical flu season. In the U.S., between 5% and 20% of the population becomes ill and 36,000 people die -- a mortality rate of between 0.24% and 0.96%...

And a pandemic doesn't necessarily have a high fatality rate...

Though scientists have begun to relax about the initial toll, they're considerably less comfortable when taking into account the fall flu season. They remain haunted by the experience of 1918, when the relatively mild first wave of flu was followed several months later by a more aggressive wave.

The longer the virus survives, the more chances it has to mutate into a deadlier form.

"If this virus keep going through our summer," Palese said, "I would be very concerned."

And while Vice President Biden advised people not to travel by plane or subway, the head of the CDC said such travel was safe:

"I think flying is safe. Going on the subway is safe. People should go out and live their lives," Richard Besser, acting director of the Centers for Disease Control and Prevention, told reporters.

"In terms of flights, if you have a fever and flu-like symptoms, you should not get on an airplane," he said.

But Besser added that officials involved in public health "should put in context what the risk is."

The bottom line is that while this flu is certainly spreading worldwide, and many folks will likely catch it - in the same way that many catch the normal flu every winter.

The real question is how dangerous it is.

While it could mutate into something extremely lethal, right now it is fairly mild.

As the New York Times explained last October in a must-read 4 page article, the presence of Goldman Sachs alumni in virtually all of the top government financial posts is so great that their team is dubbed "Government Sachs":

Indeed, Goldman’s presence in the [Treasury] department and around the federal response to the financial crisis is so ubiquitous that other bankers and competitors have given the star-studded firm a new nickname: Government Sachs.

And there are many more Goldman alums who have been - or are soon to be - appointed. For example, Obama has named Gary Gensler to head the Commodity Futures Trading Commission. And Geithner named Mark Patterson as his top aide last January

Here is just one random item this week announcing a couple of standard personnel moves:

Goldman Sachs' new top lobbyist was recently the top staffer to Rep. Barney Frank, D-Mass., on the House Financial Services Committee chaired by Frank. Michael Paese, a registered lobbyist for the Securities Industries and Financial Markets Association since he left Frank's committee in September, will join Goldman as director of government affairs, a role held last year by former Tom Daschle intimate, Mark Patterson, now the chief of staff at the Treasury Department. This is not Paese's first swing through the Wall Street-Congress revolving door: he previously worked at JP Morgan and Mercantile Bankshares, and in between served as senior minority counsel at the Financial Services Committee.

So: Paese went from Chairman Frank's office to be the top lobbyist at Goldman, and shortly before that, Goldman dispatched Paese's predecessor, close Tom Daschle associate Mark Patterson, to be Chief of Staff to Treasury Secretary Tim Geithner, himself a protege of former Goldman CEO Robert Rubin and a virtually wholly owned subsidiary of the banking industry. That's all part of what Desmond Lachman -- American Enterprise Institute fellow, former chief emerging market strategist at Salomon Smith Barney and top IMF official (no socialist he) -- recently described as "Goldman Sachs's seeming lock on high-level U.S. Treasury jobs."

The New York Times columnist David Brooks noted that Goldman Sachs employees have given more money to Barack Obama's campaign for president than workers of any other employer in the US. "Over the past few years, people from Goldman Sachs have assumed control over large parts of the federal government," Brooks noted grimly. "Over the next few they might just take over the whole darn thing."

In March, Geithner was questioned by Congresswoman Maxine Waters about the appearance of conflict of interest by Goldman Sachs insiders:

"I am just asking the questions," Waters said, "because the talk is...that this small group of decision makers at the center of it is Goldman Sachs and that's what's causing a lot of the distrust, because people are thinking or believing that Goldman Sachs, because of the connections, have had a lot to do with the decisions that are being made."

Geithner responded: "I think it's deeply unfair to the people who are part of these decisions to suggest that they were making judgments that in their view were not in the best interest of the American people."

What is interesting is that Geithner did not deny that Goldman players were at the center of the government's financial decisions, only that their decisions were not bad ones.

So has Government Sachs made selfless decisions for the benefit of the American people? Or has it engaged in some self-dealing?

Among the biggest beneficiaries of the AIG pass-through, at $12.9 billion, was Goldman Sachs, the investment-banking house that has been the single largest supplier of financial talent to the government. Critics have been quick to note — and not favorably — the almost uncanny influence of former Goldman executives. Initial phases of the rescue were orchestrated by ex–Goldman chairman Hank Paulson, who was recruited as Treasury Secretary in part by former White House chief of staff and Goldman senior exec Josh Bolten. Goldman's current boss, Lloyd Blankfein, was invited to participate in meetings with the Fed. AIG's Liddy is a former Goldman director and an ex-CEO of Allstate. Another alum, Mark Patterson, once a Goldman lobbyist, serves as chief of staff at the Treasury, while Neel Kashkari, who runs TARP, was a Goldman vice president.

Goldman has repeatedly declared that its exposure to AIG was "immaterial" and fully hedged. But some rivals point to the fact that Goldman had uncharacteristically piled into contracts with a single counterparty. "I am shocked that Goldman had this much exposure [with AIG]," says an analyst at a competing bank. "This was a major failing, but they got bailed."

Goldman got bailed twice: first on its CDS exposure and a second time, to the tune of $4.8 billion, for another AIG fiasco, losses on its securities-lending business.

Indeed, Goldman's current CEO, Lloyd C. Blankfein, apparently participated in several of the important meetings determining which companies the government would save and which would fail.

"Obama's victory and Geithner's appointment are the completion of Goldman's meticulously crafted plan to become a superpower. The firm now has the clout to impose its will on the financial markets, and the world."

GOP or Dems? Conservatives or liberals? It doesn't matter. We'll all controlled by "The [Goldman] Conspiracy." So why not surrender, let them have the power? The truth is, through their lobbyists and surrogates in Washington, they already rule America.

And while earlier reports put the number of confirmed cases in Mexico well above 100, the World Health Organization (WHO) is now giving the following update, revising the number of cases in Mexico sharply downwards:

As of 18:00 GMT, 29 April 2009, nine countries have officially reported 148 cases of swine influenza A/H1N1 infection. The United States Government has reported 91 laboratory confirmed human cases, with one death. Mexico has reported 26 confirmed human cases of infection including seven deaths.

The following countries have reported laboratory confirmed cases with no deaths - Austria (1), Canada (13), Germany (3), Israel (2), New Zealand (3), Spain (4) and the United Kingdom (5).

WHO advises no restriction of regular travel or closure of borders.

That's too good news.

The bad news is that - from what a doctor tells me - it appears that the horse is already out of the barn, the flu really is spreading worldwide, and there is no way to stop its spread.

Obama has said that schools where any children have confirmed infections may need to be closed temporarily. And it should be obvious that WHO will declare it a pandemic within the next day or so.

Here is a current list of swine flu cases by states (in the U.S.), and here is the latest official health guidance.

Many people inside the Washington beltway - including, unfortunately, President Obama - think that Larry Summers is a genius.

Of course, Summers was one of the people most responsible for gutting the Depression-era banking laws which helped protect our economy, allowing the big financial institutions to speculate and gamble using insane amounts of leverage, and insisting that toxic derivatives be left completely unregulated.

But Friday, Summers proved that he's really not that smart. On Friday, Summers basically said we should continue to do the exact same things which got us into this mess because:

All crises must end. The “self-equilibrating” nature of the economy will ultimately prevail, although that may take massive one-off government actions. Such a crisis happens only ”three or four times” per century, so taking on huge amounts of government debt is fine; implicitly, we will grow out of that debt burden.

Um . . . sorry to break it to you there Larry, but a group of economics professors has recently demolished the "self-equilibrating economy" theory:

If one browses through the academic macroeconomics and finance literature, “systemic crisis” appears like an otherworldly event that is absent from economic models. Most models, by design, offer no immediate handle on how to think about or deal with this recurring phenomenon. In our hour of greatest need, societies around the world are left to grope in the dark without a theory. ...

The implicit view behind standard models is that markets and economies are inherently stable and that they only temporarily get off track. The majority of economists thus failed to warn policy makers about the threatening system crisis and ignored the work of those who did. ...

The confinement of macroeconomics to models of stable states that are perturbed by limited external shocks and that neglect the intrinsic recurrent boom-and-bust dynamics of our economic system is remarkable. After all, worldwide financial and economic crises are hardly new and they have had a tremendous impact beyond the immediate economic consequences of mass unemployment and hyper inflation. This is even more surprising, given the long academic legacy of earlier economists’ study of crisis phenomena ... This tradition, however, has been neglected ...

And when economist James Galbraith spoke at a recent panel on the causes of the financial crisis, the first thing he listed as the main cause of the crisis was "The idea that capitalism ... is inherently self-stabilizing."

Summers a genius?

He's more like a guy swearing that the Sun really does revolve around the Earth and that the current orbit is just a temporary aberration . . . and that if we just wait a little while, "everything will return to normal".

Even though we've suffered the worst economic crisis since the Great Depression, Obama, Summers and Geithner are not really changing anything, but are instead doing everything they can to keep the status quo intact. Instead of breaking up the insolvent banks in an orderly fashion, the "too big to fail" financial players are being allowed to keep on gambling using our money.

Is the same thing happening with swine flu and industrial meat facilities?

It has been widely documented and subject of US Congressional reports that large-scale indoor animal production facilities such as that of Granjos Carroll are notorious breeding grounds for toxic pathogens.

A recent report by the US Pew Foundation in cooperation with the Johns Hopkins School of Public Health notes, ‘the method of producing food animals in the United States has changed from the extensive system of small and medium-sized farms owned by a single family to a system of large, intensive operations where the animals are housed in large numbers in enclosed structures that resemble industrial buildings more than they do a traditional barn. That change has happened primarily out of view of consumers but has come at a cost to the environment and a negative impact on public health, rural communities, and the health and well-being of the animals themselves.

The Pew study notes, ‘The diversified, independent, family-owned farms of 40 years ago that produced a variety of crops and a few animals are disappearing as an economic entity, replaced by much larger, and often highly leveraged, farm factories. The animals that many of these farms produce are owned by the meat packing companies from the time they are born or hatched right through their arrival at the processing plant and from there to market.’

The study emphasizes that application of ‘untreated animal waste on cropland can contribute to excessive nutrient loading, contaminate surface waters, and stimulate bacteria and algal growth and subsequent reductions in dissolved oxygen concentrations in surface waters.’...

Avian Flu was traced back to huge chicken factory farms in Thailand and other parts of Asia whose products were shipped across the world. Instead of a serious investigation into the sanitary conditions of those chicken factory farms, the Bush Administration and WHO blamed ‘free-roaming chickens’ on small family farms, a move that had devastating economic consequences to the farmers whose chickens were being raised in the most sanitary natural conditions. Tyson Foods of Arkansas and CG Group of Thailand reportedly smiled all the way to the bank.

On these industrial-scale hog farms, pigs are jammed together so tightly that they can barely turn around. There are so many of them that they produce many tons of manure, which is just dumped into giant open ponds.

The profits were privatized, and the losses socialized. In the case of the hog farms, the profits from the mega-farms were pocketed by the companies, while the costs of the swine flu epidemic will be borne by the taxpayers. The hog farms dumped huge amounts of manure into their local communities, which sickened not only the locals, but caused a global health problem. Similarly, the Wall Street giants cranked out trillions in "toxic assets" that the nations of the world and their taxpayers are now being asked to clean up

As one blogger wrote:

Agribusiness needs to be held accountable. They are following the same rules as bankers; keep the profits and dump losses (in the form of mad cow or now swine flu) on the public. Factor in a few million dead and maybe locally produced food from small farms is not so expensive after all.

Melvin Goodman is a former high-level intelligence officer. He was the Division Chief of the CIA’s Office of Soviet Affairs, who served as Senior Analyst from 1966 - 1990. He also served as Professor of International Security at the National War College from 1986 - 2004.

Goodman says that the arguments for covering up the extent of torture by the CIA are all bogus:

[Advocates for keeping the information classified] argue that foreign intelligence services will not share sensitive intelligence with the United States and the CIA because of the declassification and release of the torture memoranda. That is nonsense!

European liaison services as well as other intelligence services have tempered their cooperation with the CIA because of the use of torture and abuse as well as the extraordinary rendition of innocent individuals from their countries to intelligence services in the Middle East. The CIA’s extra-legal activities have complicated and undermined the task of maintaining credible relations with our allies in the battle against terrorism...

[The torture apologists also] argue that, because of the release of the memos, CIA clandestine operatives will keep their heads down and avoid assignments that carry political risk, and that the decline in CIA “morale and effectiveness” will harm American national security. More nonsense! CIA operatives and analysts are professionals who pride themselves on service to the country and their oath to the Constitution.

Very few of them took part in the corruption of intelligence on Iraqi weapons of mass destruction and very few participated in the policies of torture and abuse. They know that the law should not be broken and they want to get these issues behind them so that they can continue to serve the national interests of the United States. They know that painful truths must be acknowledged and that some price must be paid by all for the chicanery of a few.

If Agency personnel were permitted to share their opinions about torture and abuse with the press, a large majority would oppose the practices. Unfortunately, only those officers seeking to cover-up their own activities have the temerity to talk to reporters. The notion that the declassification of these memoranda have given the “enemy invaluable information about the rules by which we operate” is particularly ludicrous.

The enemy has had this information for more than five years, ever since every major newspaper in the world published the unconscionable images from Abu Ghraib. General officers who have served in Iraq and Afghanistan have testified that these images are the most important recruitment tool in the hands of terrorists and fundamentalists and have contributed to the deaths of many American men and women.

Monday, April 27, 2009

The communist tyrant launches an "investigation" into a nuclear accident in his country.

But to make sure that nothing critical is said about the way the government operated the nuclear power plant or how it responded to the accident, the government places "minders" in every interview.

The minders loom over the witnesses in an intimidating fashion, tell the witnesses that everything they say will be reported to the central government, and they even jump in an answer some of the questions directed at the witnesses.

Would the Western nations accept the results of the investigation that the government "could not have known" of the dangers from the nuclear power plant, and that the government did everything it could to minimize the damage?

Of course not.

For example, 9/11 Commission chair Thomas Kean points out that if "minders" had been present during the Commission's investigation, that would have been intimidation, which would have stemmed the flow of testimony from the witnesses:

I think the commission feels unanimously that it’s some intimidation to have somebody sitting behind you all the time who you either work for or works for your agency. You might get less testimony than you would.

A recently released 9/11 Commission memo [released in January 2009 from the Commission to the National Archives; referenced in the The National Commission on Terrorist Attacks Upon the United States, Finding Aid: Series Descriptions and Folder Title Lists, page 52, "Memo Concerning Minders Conduct"*] highlights the role of government “minders” who accompanied witnesses interviewed by the commission. It was added to the National Archives’ files at the start of the year and discovered there by History Commons contributor paxvector.

Minders acted as “monitors, reporting to their respective agencies on Commission staffs lines of inquiry and witnesses’ verbatim responses.” The staff thought this “conveys to witnesses that their superiors will review their statements and may engage in retribution;” and

Minders “positioned themselves physically and have conducted themselves in a manner that we believe intimidates witnesses from giving full and candid responses to our questions.”

The memo was drafted by three staffers on the commission’s Team 2, which reviewed the overall structure of the US intelligence community. One of the drafters was Kevin Scheid, a senior staffer who led the team. His co-writers were Lorry Fenner, an air force intelligence officer, and lawyer Gordon Lederman. The complaint was sent to the commission’s counsels, Daniel Marcus and Steve Dunne, in October 2003, about halfway through the commission’s 19-month life.

The memo makes clear that the problems were not occurring only with witnesses talking to Team 2, but also in “other teams’ interviews.” A hand-written note on a draft of the memo says, “not one agency or minder – also where we’ve sat in on other Teams’ interviews.”

According to the memo, some minders merely policed prior agreements between the commission and their parent agency about what the commission could ask witnesses, and others were simply there to make a list of documents the commission might want based on a witness’ testimony. However, some minders saw their role differently.

Intimidation through Physical Positioning

The three staffers argued minders should not answer questions for witnesses because they needed to understand not how the intelligence community was supposed to function, but “how the Intelligence Community functions in actuality.” However: “When we have asked witnesses about certain roles and responsibilities within the Intelligence Community, minders have preempted witnesses’ responses by referencing formal polices and procedures. As a result, witnesses have not responded to our questions and have deprived us from understanding the Intelligence Community’s actual functioning and witnesses’ view of their roles and responsibilities.”

The memo also describes the minders’ conduct in detail: “… [M]inders have positioned themselves physically and have conducted themselves in a manner that we believe intimidates witnesses from giving full and candid responses to our questions. Minders generally have sat next to witnesses at the table and across from Commission staff, conveying to witnesses that minders are participants in interviews and are of equal status to witnesses.”

The staffers also worried about minders taking “verbatim notes of witnesses’ statements,” as they thought this “conveys to witnesses that their superiors will review their statements and may engage in retribution.” They believed that “the net effect of minders’ conduct, whether intentionally or not, is to intimidate witnesses and to interfere with witnesses providing full and candid responses.”

Another problem with the verbatim notetaking was that it “facilitates agencies in alerting future witnesses to the Commission’s lines of inquiry and permits agencies to prepare future witnesses either explicitly or implicitly.”

Proposals

In response to this, the three staffers proposed not that minders be banned from interviews, but a set of rules governing minders’ conduct. For example, minders were to keep a “low profile,” sit out of witnesses’ sight, not take verbatim notes and not answer any questions directed at the witnesses.

Perhaps the most remarkable proposal is that the number of minders be limited to one per witness. The memo indicates that where an interviewee had served in multiple agencies, more than one minder would accompany the witness. The memo therefore requests, “Only one minder may attend an interview even if the witness served in multiple agencies,” meaning a witness would at least not be outnumbered by his minders.

As the Family Steering Committee (made up of 9/11 victims' family members) wrote in 2003:

The FSC [Family Steering Committee] is shocked with the use of “minders” in the interrogatory process. And, despite the Commissioner's similar objection to “minders”, as stated at the last press conference, “minders” continue to be present during witness examination and questioning. The FSC does not want “minders” present during any witness examination and questioning; it is a form of intimidation and it does not yield the unfettered truth.

Indeed, even 9/11 Commission co-chair Lee Hamilton admitted that "it is very difficult to tell when a witness is being intimidated by a minder."

However, a second witness - Abu Zubaida - fingered Khalid Sheikh Mohammed as the 9/11 mastermind (Zubaida was subsequently severely tortured for many months. But he initially identified KSM even before being tortured).

So we have independent confirmation that KSM was the chief architect of 9/11, right?

Retired FBI agent Daniel Coleman, who led an examination of documents after Abu Zubaida's capture in early 2002 and worked on the case, said the CIA's harsh tactics cast doubt on the credibility of Abu Zubaida's information.

"I don't have confidence in anything he says, because once you go down that road, everything you say is tainted," Coleman said, referring to the harsh measures. "He was talking before they did that to him, but they didn't believe him. The problem is they didn't realizehe didn't know all that much."

***

Abu Zubaida ... was a "safehouse keeper" with mental problems who claimed to know more about al-Qaeda and its inner workings than he really did.

***Looking at other evidence, including a serious head injury that Abu Zubaida had suffered years earlier, Coleman and others at the FBI believed that he had severe mental problemsthat called his credibility into question. "They all knew he was crazy, and they knew he was always on the damn phone," Coleman said, referring to al-Qaeda operatives. "You think they're going to tell him anything?"

Pulitzer Prize winning journalist Ron Suskind writes that Coleman advised a top FBI official at the time:

"This guy is insane, certifiable, split personality."

So the two witnesses who said that Khalid Sheikh Mohammed was the 9/11 mastermind were:

A guy who confessed to a crime he didn't commit, and was waterboarded 183 times in one month, and

A guy who was crazy even before the CIA started torturing him, who claimed to know a lot more than he really did

No judge in the country would convict based upon such flimsy evidence.

Note: This is not to say that some people from the middle east were not involved in 9/11. They may have been. But the government has wholly failed to prove even the basics of its version of 9/11.

Note: Retired Army General Russell Honoré asked on CNN whether the swine flu came out of a lab or another source. Because I have relatives in the medical profession who are currently swamped with swine flu related questions, unless and until there is proof that this strain of swine flu was developed in a lab, I'm not going to address the issue.

Scientists now say that the center of our Milky Way galaxy is high in ethyl formate. In other words, an astronaut visiting the center of our galaxy - if he took off his helmet - would smell a rum smell and taste a raspberry taste.

Friday, April 24, 2009

In an interview today with Huffington Post, Senate foreign relations committee chairman John Kerry said that he was concerned the release of photos depicting the abusive treatment of detainees in U.S. custody could become a "propaganda tool" for terrorist organizations.

It is true that photos of barbarian acts of torture could be used by terrorists to promote anti-American sentiments.

But only to the extent that those who ordered torture go unpunished.

If Bush, Cheney, Rumsfeld, Rice and the others who ordered torture are allowed to go free, then that says loud and clear to the world:

"WE PROTECT TORTURERS. WE SAY ONE THING IN PUBLIC, BUT WE PROTECT AND NOD AND WINK AT THE BARBARIANS WHO HAVE DONE THIS TO BROWN-SKINNED PEOPLE."

But if the sickos who ordered torture are brought to justice, then the world will look at these acts as an unfortunate chapter in America's history that has been closed.

We will be looked on as a people who strayed, but have returned to our roots and to stand up for human rights and justice.

Terrorists would not be able to use the torture pictures as a recruiting tool if the U.S. political and justice systems and the American people stand up and shout "THIS IS NOT WHO WE ARE!", and if we admitted our errors.

On the other hand, failing to prosecute the criminals will weaken America's defenses and subject us to attack for generations to come. It is a matter of national security.

US banks could be forced to hold more equity than initially expected after it emerged that "stress tests" organised by regulators take into account risks not commonly understood to be included in the assessment.

In addition to looking at potential losses on loans and securities, bank examiners are looking at so-called "counterparty risk" on derivative contracts - the chance that the party on the other end of a derivatives deal might default, depriving the bank of a payment that is due.

They want to be sure each bank has enough capital to cover this potential source of loss as well as its more traditional lending risks.

In the past regulators have focused on traditional lending risks that form the basis of bank capital requirements. The stress test provides a more rounded assessment of the amount of equity a bank needs in order to be considered well capitalised relative to the risks it is running.

This means banks that have incurred large counterparty risks in their trading books could be forced to hold more capital.

(references to "counterparty risks" usually mean that credit default swaps are involved).

And economist Martin Weiss notes (as summarized today by leading economist Nouriel Roubini in a discussion of the stress tests):

OCC [Office of the Comptroller of the Currency] data show that as of Q4, the total credit exposure with derivatives as % of risk-based capital was: 179% for Bank of America, 278% for Citibank, 382% for JPMorganChase; 1056% for GoldmanSachs. "Moreover, since JPM holds half of all the derivatives in the U.S. banking industry, JPMorgan is ground zero in the debt crisis."

In other words, contrary to what lobbyists in the credit default swap industry say, the risk of losses from CDS is still very real.

American Public Radio interviewed the former chief accountant at the SEC, who said this was illegal and should be prosecuted:.

Reporter: If Henry Paulson and Ben Bernanke really told the CEO of Bank of America to keep quiet about losses at Merrill Lynch, they were probably breaking the law. That’s according to Lynn Turner, former chief accountant at the SEC.

Lynn Turner: If these allegations are proven true, both Bernanke and Paulson should be prosecuted by the SEC to the fullest extent of the law.

Will they be prosecuted? Or will it be yet another example of the high-and-mighty being above the law?

The Fed said today that - instead of letting the insolvent banks fail - which is what virtually all of the independent experts are recommending (see this for example), the Fed will rescueall banks which fail the stress test.

"The bottom line is these techniques have hurt our image around the world," [Director of National Intelligence Dennis] Blair said in the statement. "The damage they have done to our interests far outweighed whatever benefit they gave us and they are not essential to our national security."

A top counter-terrorism expert says torture increases the risk of terrorism (and see this).

One of the top military interrogators said that torture by Americans of innocent Iraqis is the main reason that foreign fighters started fighting against Americans in Iraq in the first place (and see this).

Former counter-terrorism czar Richard A. Clarke says that America's indefinite detention without trial and abuse of prisoners is a leading Al Qaeda recruiting tool

A 30-year veteran of CIA’s operations directorate who rose to the most senior managerial ranks, says:

"This is not just because the old hands overwhelmingly believe that torture doesn’t work — it doesn’t — but also because they know that torture creates more terrorists and fosters more acts of terror than it could possibly neutralize.”

The reporter who broke Iran-Contra and other stories says that torture actually helped Al Qaeda, by giving false leads to the U.S. which diverted its military, intelligence and economic resources into wild goose chases

Raw Story says that torture might have resulted in false terror alerts

We have expended enormous resources in fighting threats that are not there, while failing to expend the necessary resources and time to figure out accurately what exact threats we do face. When you hear of the intelligence extracted by torture, remember that it was the intelligence that "proved" that Saddam and WMDs and links to al Qaeda.

And remember, our military and intelligence leaders say that the economic crisis is now the biggest threat to America's national security.

Thursday, April 23, 2009

The Bush administration did not inform Congress that it had waterboarded detainees in classified briefings, after the agency had already done so...

Pelosi told reporters that the administration officials only told her and those in a classified briefing in the fall of 2002 that they believed they had the legal authority to do so, based on Office of Legal Counsel memos which have recently been released by the Obama administration.

"In that or any other briefing...we were not, and I repeat, were not told that waterboarding or any of these other enhanced interrogation techniques were used," said Pelosi. "What they did tell us is that they had some legislative counsel...opinions that they could be used, but not that they would."

However, that is likely untrue.

As noted by the above-linked article at Huffington Post:

Her assertion contradicts a recently released Senate committee report that cited CIA records to claim that senior members of Congress in both parties were briefed on the waterboarding, which had already been done to detainee Abu Zubaydah.

Four members of Congress met in secret for a first look at a unique CIA program designed to wring vital information from reticent terrorism suspects in U.S. custody. For more than an hour, the bipartisan group, which included current House Speaker Nancy Pelosi (D-Calif.), was given a virtual tour of the CIA's overseas detention sites and the harsh techniques interrogators had devised to try to make their prisoners talk.

Among the techniques described, said two officials present, was waterboarding, a practice that years later would be condemned as torture by Democrats and some Republicans on Capitol Hill. But on that day, no objections were raised. Instead, at least two lawmakers in the room asked the CIA to push harder, two U.S. officials said.

"The briefer was specifically asked if the methods were tough enough," said a U.S. official who witnessed the exchange...

The CIA gave key legislative overseers about 30 private briefings, some of which included descriptions of that technique and other harsh interrogation methods, according to interviews with multiple U.S. officials with firsthand knowledge. With one known exception, no formal objections were raised by the lawmakers briefed about the harsh methods during the two years in which waterboarding was employed, from 2002 to 2003, said Democrats and Republicans with direct knowledge of the matter. The lawmakers who held oversight roles during the period included Pelosi...

"Among those being briefed, there was a pretty full understanding of what the CIA was doing," said Goss, who chaired the House intelligence committee from 1997 to 2004 and then served as CIA director from 2004 to 2006. "And the reaction in the room was not just approval, but encouragement."...

Abu Zubaida, the first of the "high-value" detainees in CIA custody, was subjected to harsh interrogation methods beginning in spring 2002 after he refused to cooperate with questioners, the officials said. CIA briefers gave the four intelligence committee members limited information about Abu Zubaida's detention in spring 2002, but offered a more detailed account of its interrogation practices in September of that year, said officials with direct knowledge of the briefings.

The CIA provided another briefing the following month, and then about 28 additional briefings over five years, said three U.S. officials with firsthand knowledge of the meetings. During these sessions, the agency provided information about the techniques it was using as well as the information it collected.

"Experience indicates that the use of force is not necessary to gain the cooperation of sources for interrogation. Therefore, the use of force is a poor technique, as it yields unreliable results, may damage subsequent collection efforts, and can induce the source to say whatever he thinks the interrogator wants to hear."

A 30-year veteran of CIA’s operations directorate who rose to the most senior managerial ranks, says:

“The administration’s claims of having ‘saved thousands of Americans’ can be dismissed out of hand because credible evidence has never been offered — not even an authoritative leak of any major terrorist operation interdicted based on information gathered from these interrogations in the past seven years. … It is irresponsible for any administration not to tell a credible story that would convince critics at home and abroad that this torture has served some useful purpose.

This is not just because the old hands overwhelmingly believe that torture doesn’t work — it doesn’t — but also because they know that torture creates more terrorists and fosters more acts of terror than it could possibly neutralize.”

The FBI interrogators who actually interviewed some of the 9/11 suspects say torture didn't work

A former US Air Force interrogator said that information obtained from torture is unreliable, and that torture just creates more terrorists

Many governments that have routinely tortured to obtain information have abandoned the practice when they discovered that other approaches actually worked better for extracting information. Israel prohibited torturing Palestinian terrorist suspects in 1999. Even the German Gestapo stopped torturing French resistance captives when it determined that treating prisoners well actually produced more and better intelligence.

Still don't believe it? These people also say torture doesn't produce usable intelligence:

Former high-level CIA official Bob Baer said "And torture -- I just don't think it really works ... you don't get the truth. What happens when you torture people is, they figure out what you want to hear and they tell you."

Rear Admiral (ret.) John Hutson, former Judge Advocate General for the Navy, said "Another objection is that torture doesn't work. All the literature and experts say that if we really want usable information, we should go exactly the opposite way and try to gain the trust and confidence of the prisoners."

Michael Scheuer, formerly a senior CIA official in the Counter-Terrorism Center, said "I personally think that any information gotten through extreme methods of torture would probably be pretty useless because it would be someone telling you what you wanted to hear."

Dan Coleman, one of the FBI agents assigned to the 9/11 suspects held at Guantanamo said "Brutalization doesn't work. We know that. "

Many other professional interrogators say the same thing (see this, this, and this).

In fact, one of the top interrogators in Iraq got information from a high-level Al Qaeda suspect not through torture, but by giving him cookies.

“Violence is taboo. Not only does it produce answers to please, but it lowers the standard of information.”

Indeed, one of the top military interrogators said that torture does not work, that it has resulted in hundreds or thousands of deaths of U.S. soldiers, and that torture by Americans of innocent Iraqis is the main reason that foreign fighters started fighting against Americans in Iraq in the first place (in fact, the experts agree that torture reduces national security).

During the harshest period of my interrogation I gave a lot of false information in order to satisfy what I believed the interrogators wished to hear in order to make the ill-treatment stop. I later told the interrogators that their methods were stupid and counterproductive. I'm sure that the false information I was forced to invent in order to make the ill-treatment stop wasted a lot of their time and led to several false red-alerts being placed in the U.S.

And when long-time FBI director Mueller was asked whether any attacks on America been disrupted thanks to intelligence obtained through “enhanced techniques”, he responded “I don’t believe that has been the case.”

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